Avoiding litigation

There are no prizes for taking a case to Court. In most cases there are much better alternatives to litigation disputes such as settlement or mediation. Our job is to apply judgement on how best to avoid litigation based on your position and find a workable solution.

Please get in touch for an initial review on how to approach avoiding litigation whilst finding resolution. We do provide fee estimates and an outline options to consider.

To help you understand how we approach find alternatives to settle litigation and disputes we have set out some pointers based on questions we are often asked.

Reasons not to litigate

It is not uncommon for litigation legal fees to exceed the value of the claim. There are several reasons for finding an alternative to litigation:

There is never full recovery of legal fees

The general rule is that the winner recovers its legal costs from the loser. But the recovery is never 100% and generally falls between 60% – 80% of the total legal costs.

There is a need to be proportionate

All costs have to be reasonably incurred and proportionate. Use of expensive lawyers when more reasonably priced lawyers have the skills is increasingly dangerous. The risk is that you are forced to pay some or all of the other side’s legal bill. This is even if you win the case.

UK legal system designed to encourage settlement

The UK legal system is designed to encourage settlement either directly between the parties or by mediation (discussed below). If you do not show attempts to settle the court can order that you pay some or all of the opponent’s legal costs even if the opponent loses.

Getting ready to avoid litigation disputes

When dealing with a case, it is our job to conduct a cost/benefit analysis. We can then tell you how we think the dispute can be resolved. Often this will involve two levels of planning:

Off the record discussions

Off the record discussions are conducted without prejudice. Off the record means that the discussions are private and not admissible in court. They are used to explore pressure points and the appetite for settlement. Settlement is possible at any time and can take place once a court hearing has commenced.

On the record conduct of the case

On the record steps – these are steps that can be used in court in the event settlement cannot be achieved. Although all parties ultimately hope to settle it is still necessary to evaluate the case and build up any weak areas. To be unprepared sends the wrong message to your opponent. In many cases your opponent can be forced to disclose information needed for your case.

Sometimes we ramp up the pressure on the other side knowing that they or you do not want the case to end up in court. The reason is this can then open a route to settlement discussions. Sometimes initial offers are rejected initially only to be re-visited further down the line.

Timing for a settlement offer

There are certain points when we find settlement is most likely to be achieved. The pressure points usually coincide with dates for when the parties have to progress the case and hence incur legal fees – for example prepare witness statements.

We will look to whether any offer can be made tax efficiently. When dealing with shareholder disputes we will look to see if the offer can be structured to preserve entrepreneurs’ relief. Or, if the company can buy back shares from a departing shareholder and secure capital treatment.

Using mediation to avoid litigation disputes

The UK legal system is designed to encourage settlement out of court. If settlement cannot be achieved by direct negotiation it can often be achieved via mediation. Many people do not realise that mediation is a successful alternative to litigation and resolves disputes in a great many cases.

Basic idea behind mediation

The basic idea is an independent third party mediator assists:

Each party understand the other’s point of view,

By suggesting settlement options the parties may not have considered,

In brokering an agreed settlement.

Advantages of mediation

Mediation is becoming an increasingly common method of dispute resolution, because:

Mediation is quick and inexpensive compared to court proceedings;

The parties are in control of the decision and the terms of the resolution. Unlike the position with a court hearing or arbitration a decision is not forced upon the parties. All decisions reached via mediation have to be consensual.

Communication between the parties is facilitated through a neutral third party;

The mediation process is flexible, sensitive and adaptable; and

The client’s commercial and technical interests and aims can be achieved through mediation.

Even if the mediation proves unsuccessful, the parties are likely to have benefited through having the opportunity to listen to each other’s views, which in turn narrows the issues in dispute.

Selecting a mediator

Once the parties have agreed to mediate, the parties can either select a mediator themselves or request an ADR organisation, such as the Centre for Effective Dispute Resolution (“CEDR”), to appoint a mediator on their behalf. A venue will have to be selected and it is common for one of the parties’ solicitors to hold the mediation at their offices.

A mediator’s costs will usually be shared between the parties. The parties will also agree to pay their own legal fees in respect of the mediation. If the mediation fails, the costs may be considered as part of a party’s costs in the case come trial.

The mediation hearing

Before the mediation, the parties’ solicitors will often prepare a bundle of documents to be submitted to the mediator in preparation for the mediation itself. Not only does this save time, it gives the mediator the opportunity to understand the merits of each party’s case from the outset.

Arbitration as an alternative to litigation

Arbitration can be an alternative to litigation. Arbitration is conducted under a statutory framework and is usually presided over by a former Judge or expert barrister. The arbitrator’s decision is binding on the parties and there is a set process for the parties to follow which is not dissimilar to the Court process involving disclosure of documents.

Arbitration clauses requiring the parties to arbitrate in the event of a dispute are common in shipping, oil, gas, insurance, property, and aviation contracts. Arbitration is more suited to technical disputes involving complex issues on fault. Arbitration is not as flexible as mediation which means that it is less commonly used in practice.

Refusing to seek alternatives to litigation

You run the risk of being ordered to pay the opponent’s legal fees if mediation is unreasonably refused. The court is likely to regard the following as an unacceptable excuse:

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